TMI Blog2008 (6) TMI 373X X X X Extracts X X X X X X X X Extracts X X X X ..... and earned capital gains. The details of dates of the sale of shares and the amount of sale considerations are as follows : Sale Date Amount in Rs. 13-5-1995 6,49,025 25-5-1995 5,00,000 3-6-1995 5,99,000 15-7-1995 4,99,250 25-9-1995 6,98,950 13-1-1996 74,850 Total Sale Consideration 30,21,075 The long-term capital gains computed on the said sale proceeds long-term capital assets worked out to Rs. 27,01,204. The assessee entered into an agreement with Harshad Rai Poonamchand Doshi, the Builder of Row houses in Shanti Park vide the Articles of Agreement dated 26-8-1996 and paid Rs. 30.50 lakhs for purchase of a Row House No. 30 consisting of Ground plus First Floor, Shanti Vidya Nagari or Shanti Park at Meera Road, Distt. Thane. The details of payments are as follows : Date of payment Amount in Rs. 3-8-1996 6,00,000 8-8-1996 8,00,000 14-8-1996 9,50,000 20-8-1996 4,50,000 26-8-1996 2,50,000 Total 30,50,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of sub-section (3) of section 54F. Accordingly, Assessing Officer ignored the investment in Flat No. 5 in Abhijit building and denied the claim of exemption under section 54F. 5. Aggrieved with the decision of the Assessing Officer, the assessee filed an appeal before the CIT(A). CIT(A) considered the facts relating to accrual of long-term capital gains on 3-1-1996 (last payment), investment of the same capital gains first in the row house in August 1996, cancellation of the proposed purchase of row house and receiving of the refund of amounts in June 1997, reinvestment of the refunded capital gains in the Flat at Abhijit on 28-3-1998. He held that the exemption under section 54F is, inter alia, is available where the assessee has, within 2 years, purchased or, within period of three years constructed a residential house. He further held that in the light of the cancellation of agreement for purchase of row house, there is nothing to show either purchase or construction of a new asset has been made by the assessee till 28-3-1998. He further held taking 13-1-1996, i.e., last date on which the capital gain arose, the last date for investment in the purchase of new asset u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision of Jodhpur Bench of the ITAT in the case of Jagan Nath Singh Lodha v. ITO [2004] 85 TTJ 173 for the proposition that exemption under section 54F is available to the assessee, if the intention of the assessee from the very beginning is to purchase a residential house, even though he failed to deposit the amount in the Capital Gain Account Scheme during the interregnum. 7. The ld. DR for revenue relied on the orders of the lower authorities and argued that the investment of the long-term capital gains vide the can-celled agreement in respect of purchase of the row house, should be considered as the purchase of a new asset as per sub-section (1) of section 54F. The cancellation of the relevant agreement and receiving the refund during the period of 3 years from the date of the purchase agreement dated 26-8-1996, attracts the provisions of sub-section (3). The same should be treated as the transfer of new asset, which is prevented within a period of three years from the date of its purchase under said sub-section (3). Therefore, the withdrawal of exemption by the Assessing Officer under section 54F is proper. Notwithstanding the above, Sr. DR argued that, if the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Flat No. 5 in Abhijit is the case of purchase or the case of construction and whether applicable limitation of time period is two or three years. 9. Section 54F relating to Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house is the relevant provisions in the Income-tax Act, 1961 and appropriate extracts of the same read as under : "54F. (1) Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has, within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say ( a )and ( b )****** Provided : ****** ( a )****** ( i )to ( iii )****** ( b )****** E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sset together with the amount so deposited shall be deemed to be the cost of the new asset : Proviso..." 10. We have so far narrated the facts of case, decisions of Assessing Officer as well as the CIT(A), arguments of both the parties and the relevant provisions of section 54F. Further, various issues that cropped up during the rival arguments have also been narrated above. After considering the above, we proceed to examine the assessee s case in the light of the conditions specified in various sub-sections of section 54F. 11. Sub-section (1) of section 54F mentions to the eligible long-term capital assets, i.e. , any long-term capital asset not being the residential house, eligible new asset and modes of investment of such capital gains in the new asset and time limitations when the new asset is purchased or constructed apart from others. We find that there is no dispute on the eligibility of the long-term capital gains and there is dispute on the eligible new asset, mode of investment of such gains and applicable time limitations for such investment of the same. The assessee holds that the investment of gains on 28-3-1998 in the construction of Flat No. 5 in under con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of Income-tax Act. Therefore, we are of the considered opinion that the decision of the lower authorities in treating the row house as the new asset is misplaced. We find the relevance of the Apex Court judgment in the case of CIT v. T.N. Aravinda Reddy [1979] 120 ITR 46 for the proposition that in the context of relief under section 54, investment has to be understood in a liberal sense without limiting the meaning of lexical legalese and word purchase should be understood as in the sense of plainspoken people . Further the decision of Jodhpur Bench of the ITAT in the case of Jagan Nath Singh Lodha ( supra ) is relevant for the proposition that exemption under section 54F is available to the assessee, if the intention of the assessee from the very beginning is to invest in the new asset, though certain conditions are not met for genuine facts and circumstances. Therefore, we have no confusion in our minds in favour of ignoring the whole issue of investment of capital gains in the purchase of Row House No. 30 and in not ignoring the assessee s investment of said capital gains in the Flat No. 5 in Abhijit Building. 13. Now we shall undertake to discuss the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion with the row house acquisition, there is no way the assessee would have complied with the condition of depositing in the bank as per sub-section (4) of section 54F. The decision of the Tribunal in the case of Jagan Nath Singh Lodha ( supra ) is relevant. Accordingly, we are of the considered opinion that there is no violation of the condition of sub-section (4) of section 54F by the assessee in this case. 15. After considering the various conditions in sub-sections (1), (3) and (4) of section 54F to the facts of the case, the issue for consideration is whether the investment of capital gains in the Flat No. 5 in Abhijit Building entitles the assessee to the exemption under the said section. It is already mentioned above that the assessee entered into an agreement with M/s. Sonzol Finance and Investment (P.) Ltd., which is engaged in the construction of building called Abhijit . The assessee paid Rs. 30.50 lakhs on 28-3-1998 and purchased the block of shares of the company and got them transferred to his name under respective Agreements to Sell Shares from the respective Share Holders of M/s. Sonzol Finance and Investment (P.) Ltd. and became entitled to an allotment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee s investment of Rs. 30.50 lakhs on 28-3-1998 in the construction of the house in Abhijit building falls within 3 years of the first sale of the shares sold on 13-5-1995. Then from the point of view of substantial investment of the capital gains in the new asset also, we find that assessee fulfilled the requisite condition relating to 3 years period. The above view is fortified by the decision of the Madras Bench of ITAT in the case of Mrs. Seetha Subramanian v. Asstt. CIT [1996] 56 TTJ 417 too. Therefore, the investment of the long-term capital gains in the Flat No. 5 in Abhijit Building is the case of construction and applicable time limitation is three years and not two years as held in the impugned order. 17. To sum up, we find that the assessee has not violated the provisions of sub-sections (3) and (4) of section 54F relating transfer of new asset during lock-in-period and depositing the capital gains before the due date for filing the return of income in view of the peculiar circumstances specific to the assessee. Further, we also find that the investment in the flat at Abhijit building is the case of construction and therefore 3 years time li ..... X X X X Extracts X X X X X X X X Extracts X X X X
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